José Antonio Hidalgo: It is essential for the sustainability of the industry to maintain the minimum price of support at $ 6.25

This Friday, October 21, from 10:00 a.m. the negotiation table will be installed to set the minimum support price of the banana box that will govern for 2022. The producers, through the National Federation of Banana Producers of Ecuador ( Fenabe), proposed a price of $ 7.50, a position not shared by the export sector. José Antonio Hidalgo, executive director of the Association of Banana Exporters of Ecuador (AEBE), exposes the position of this sector and the proposal that they will bring to the meeting tomorrow.

What is the proposal of the export sector and under what argument?

We do not agree with the price increase to $ 7.50 mentioned. The export sector has been hit hard by the increase in the cost of its inputs, from the cardboard box to shipping costs (freight). All of these factors remain on the rise and there does not seem to be a stable outlook for 2022. On the other hand, our contracts in Europe present higher demands and some markets are putting pressure to reduce the cost of fruit. The price of international fruit is set by the supermarkets of the destination countries, which have already stated, in some cases, that it is impossible for them to increase their sales prices to the consumer considering that they are just beginning to see a recovery in consumption.

For this reason, it is essential for the sustainability of the industry to maintain the minimum price of support at $ 6.25.

Banana producers propose a minimum price to support the fruit of $ 7.50

Since last year a price system with two options has been in force, one fixed and the other seasonally. What results and impact has this new scheme had?

The effects must not only be observed based on the price itself, but are due to exogenous factors that are beyond the control of producers and exporters. I mention a few:

The policy of price containment in areas such as the European Union, Russia, the Middle East, to avoid an increase in inflation, given the economic crisis that this area experienced as a result of the pandemic. The transfer of banana consumption to other fruits that, in this year 2021, have set export records and prices due to the demand in those areas. I mean avocado, blueberries, the presence of more citrus fruits, the good year of pineapple in terms of volume.

The devaluation of currencies such as the Russian ruble, that 90% of our bananas must pass through the Panama Canal, unlike our regional competitors, and that despite the fact that there was less production in the entire Latin American region, the price has not responded to these factors.

In addition, there are countries like China that have preferred to opt for bananas produced in Laos, Cambodia, Vietnam with their investments, causing us to go from second supplier to fourth supplier.

The aforementioned factors have caused at one point in 2021 a historical reduction in the price in recent years, reaching the price of a box of bananas in the European Union at 10 euros per 18.5 kg. For some weeks, exporting companies have been working with negative cash flow.

How many producers and exporting companies currently exist in the country and how many markets does Ecuadorian bananas reach?

Currently there are more than 6,000 producers and about 300 exporters of the fruit. We have reach in all regions of the world, mainly Europe and the United States.

What are the current export figures for the fruit, compared to the same period in 2020?

Until August 2021, 13.8 million boxes were exported less than in the same period of 2020, which represents a decrease of 5%.

Banana exports fell 4.57% in the first semester due to a reduction in purchases in several markets

Why are these drops in banana shipments due?

It was basically due to the effects generated by a series of logistical and mainly climatological factors, such as low temperatures, increased ash fall due to volcanic activity, as well as the decrease in production caused by the effect of the maximum limits policies. of residues that restrict the use of molecules such as chlorpyrifos and others without considering the needs of the production areas. This hindered the performance of the industry during the first half of 2021. At the moment we have a possibility to increase the volume of production for the third quarter of this 2021.

What are the expectations of the export sector for 2022?

Establish a true shared responsibility of the entire value chain, especially on the part of supermarkets that require more and more international certifications, causing over-certification of the market and imposing standards that exceed the requirements of the “farm to fork” strategy and the Green Pact, which increases costs, but is not compensated through prices consistent with the requirements.

Improve the price in international markets to levels that allow covering the increases in the costs of the cardboard box, freight, fertilizers, plastics.

Increase the volume of production and consolidate ourselves in the markets of the Middle East, the former Soviet republics and Eastern Europe. They have prevented the reduction volume from being higher than the one already mentioned and that the price increases of inputs for production and export stop.

In addition, improve our presence in the EFTA area, the United Kingdom and the Baltic area of ​​the European Union, as well as our participation in the markets of China, Japan, South Korea and the Eurasian area, for which the signing of agreements is required. international markets that allow us to improve the conditions in which our fruit enters these countries.

Why is it necessary to seek agreements with these markets?

Due to the high growth potential of these markets for our exports given their size and level of consumption. Today, our bananas enter with tariffs of 10% in the case of China, 20% -10% in Japan, 30% in South Korea and this year we have lost the benefits of the general system of preferences with Russia, which increases by one point percentage of the tariff for that country. (I)